Trade, wages, and 'superstars'
We study the effects ''globalization'' on wage inequality. Our ''global'' economy resembles Rosen (1981) ''Superstars'' economy, where a) innovations in production and communication technologies enable suppliers to reach a larger mass of consumers and to improve the (perceived) quality of their products and b) trade barriers fall.When transport costs fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the former turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled are stand to lose or gain from improved production or communication technologies, in contrast, depends on wether technology is skill-complement or substitute. The model gives an intuitive explanation for the empirical regularities that skill intensity, market size and wages tend to be positively associated to exporting activity, across sectors and plants.
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- Bernard, Andrew B. & Bradford Jensen, J., 1999.
"Exceptional exporter performance: cause, effect, or both?,"
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- Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
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- Bradford J Jensen & Andrew B Bernard, 1994.
"Exporters, Skill Upgrading And The Wage Gap,"
94-13, Center for Economic Studies, U.S. Census Bureau.
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"Export Entry and Exit by German Firms,"
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6538, National Bureau of Economic Research, Inc.
- Andrew Bernard & Joachim Wagner, 2001. "Export entry and exit by German firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
- Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
- Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
- Smith, Alasdair & Venables, Anthony J., 1991. "Economic integration and market access," European Economic Review, Elsevier, vol. 35(2-3), pages 388-395, April.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, January.
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